Guest Post: A First In History: The Coming Simultaneous European Banking Collapse

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Tue, 06/07/2011 - 06:57 | 1346214 gratefultraveller
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Cash b......

Tue, 06/07/2011 - 09:04 | 1346465 shortus cynicus
shortus cynicus's picture

OK, so what is the best investment or wealth preservation move for such situation:

  1. EUR cash
  2. leveraged or cash payed real estate
  3. PMs or other currencies
  4. ... any other ideas?
Tue, 06/07/2011 - 13:22 | 1347390 Tom_333
Tom_333's picture

Don´t worry. ECB is to BIG to fail.....

Thu, 06/09/2011 - 08:33 | 1354041 fx
fx's picture

This is hillarious. China as a poster child for financial prudence? WTF?? Not that European banks were sound. But comparing them to China?? Reuters just reported a 460 bn $ bail-out for bad loans (infracstructure projects). All bigger chinese banks have plenty of off-balance sheet loans and investments.  The 21% MRR is a complete joke if the banks can hide all the stuff off-balance and are forced/incentiviced to take on billions in loans that can never be repaid right from the day they are handed out. But of course China does not need to print $$ to bail itself out. they are coming directly from Ben in retuirn for all the ipods, ipads, iphones etc. that the US consumes by paying wit IOUs

Tue, 06/07/2011 - 07:02 | 1346215 tradewithdave
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For those who have not had an opportunity to read the entire Levin/Coburn Wall Street investigative report from the Senate, here's a link:

http://tradewithdave.com/?p=6811

Dave Harrison

www.tradeiwithdave.com

Tue, 06/07/2011 - 10:09 | 1346647 hbjork1
hbjork1's picture

Dave,

Thanks for that post!

Levin is one of the good guys; an honest soldier.  Too honest to go any further on the national scene.

Tue, 06/07/2011 - 07:02 | 1346217 Alcoholic Nativ...
Alcoholic Native American's picture

Send in NATO.  Operation Austerity must go forward.

Tue, 06/07/2011 - 07:05 | 1346222 vxpatel
vxpatel's picture

Deploying NATO requires lots of money...and this is austerity time!

Tue, 06/07/2011 - 07:14 | 1346228 vxpatel
vxpatel's picture

No soup for anyone!

Tue, 06/07/2011 - 07:08 | 1346220 Josephine29
Josephine29's picture

Even worse than this is the fact that the balance sheet of the European Central Bank is in a dreadful state due to all the low quality (junk) collateral it has on its books. the economist Shaun Richards has been pursuing this subject for some months now and on todays update we get.

The problems and possible insolvency of the European Central Bank gets a wider audience at last....

 

Another Problem the Central Banks have the wrong amount of debt

When I looked at these holdings it occurred to me that they are the wrong amount. Let me explain with reference to the Central Bank of Ireland. According to its 2010 accounts it was holding some 2.3 billion Euros of debt under the SMP at the year-end, but if we take its ECB ”share” or capital key of 1.59% it should have been holding more like just under 1.2 billion Euros. Are the nations in trouble being forced to hold more than their share? Not much of a rescue is it if they are?

http://t.co/9fV7guT

 

The problems and the misrepresentation are getting worse and worse...

Tue, 06/07/2011 - 07:05 | 1346221 Weisbrot
Weisbrot's picture

 

Austerity for the Banks

Austerity for the Governments

Prosperity for the People

 

 

Tue, 06/07/2011 - 07:09 | 1346225 GeneMarchbanks
GeneMarchbanks's picture

Goolsbee we hardly knew ya! Austan just quit on Obama. Proving once again that those who can't... teach.

Where's ZH on this story. Here's the link: double u X3 dot.... fuck it...

Tue, 06/07/2011 - 07:13 | 1346227 buzzsaw99
buzzsaw99's picture

The reduction of the banking sector to a size that meets the needs of the economy and not the needs of the bankers...

 

That's just crazy talk.

Tue, 06/07/2011 - 07:11 | 1346229 huggy_in_london
huggy_in_london's picture

You make it sound like chinese banks are great.... you know very little about chinese banks it seems.  We are just about due for the once-a-decade chinese bank write offs.

Tue, 06/07/2011 - 07:15 | 1346231 scratch_and_sniff
scratch_and_sniff's picture

How is anyone going to regulate away 700trln of derivatives? No one even wants to think about looking at it - its like a dead body hidden under the bed; that's why we wont see that kind of collapse anytime soon, because a pan-european bank collapse would force the reality that these bets can never be squared.

Tue, 06/07/2011 - 07:21 | 1346239 buzzsaw99
buzzsaw99's picture

the banks do what they want bitchez

http://www.youtube.com/watch?v=lZLVi4v7lSM

Tue, 06/07/2011 - 07:19 | 1346235 Sean7k
Sean7k's picture

What happens once more countries start to default? If Iceland, Greece, Ireland, Portugal and more are defaulting, where will the discipline of isolation land the IMF? What if the US defaults? At that point, there will be no discipline and the system crashes.

The penalty will no longer be effective. Heck, defaulting countries could create trade blocs to mitigate isolation.

Look for the collapse and reset to be the exact same system with new terminology, new leadership and the same old structure. This time "they" will get it "right" with regulations enforced "equally" to insure this kind of irresponsible behavior never happens again!

Just like after the banks raped the public in every other episode through history. Nothing changes as long as you have governments that require you trade liberty for security and organization. Government is  the police power of the banks.

Tue, 06/07/2011 - 09:24 | 1346513 shortus cynicus
shortus cynicus's picture

Government is  the police power of the banks.

Of course it is. Without government you can't execute your creditor rights. Without state repression any debtor would simply go away from the debt making creditor's asset worthless and debt money strongly devalued.

Banks were a great founding source for government Ponzi-Scheme. But since world has hit debt saturation level, banks are no more a useful.

World must fall back to its roots: real economy and small government.

Tue, 06/07/2011 - 07:18 | 1346238 Tense INDIAN
Tense INDIAN's picture

I Like these kind of ARMAGEDDON articles

Tue, 06/07/2011 - 07:33 | 1346257 Chris Jusset
Chris Jusset's picture

Yeah, including this statement of imminent DOOM:

When one of these banks cannot meet its obligations, leaving countless counter parties without expected funds, the dominoes will fall at unprecedented speed in a realtime financial world.  It all could happen within 24 hours from the breakdown of a major bank ...

Tue, 06/07/2011 - 07:57 | 1346288 buzzsaw99
buzzsaw99's picture

counterparty issues will be AIGed.

Tue, 06/07/2011 - 08:04 | 1346306 equity_momo
equity_momo's picture

The lesson from 08 tells me even though there will be signs of a systemic collapse , most of us will ignore them or think we can leave it right till the last minute. It takes at least 48 hours to withdraw large amounts of cash from a bank a/c.  And even longer to get it out of a broker.  I suspect when these bank holidays occur , savers and investors are going to get the mother of all ass rapings when they come out the other side. Think its time i took my ball home and watched.

Tue, 06/07/2011 - 07:25 | 1346246 kito
kito's picture

Wouldnt the european banks have begun to write off their bum loans by now?

Tue, 06/07/2011 - 07:26 | 1346249 rufusbird
rufusbird's picture

"Minimum reserve requirements of a paltry 2% in the Eurozone mean that European banks are geared 1:50 (and possibly higher through the use of off balance sheet vehicles). An adverse 2% move of markets can wipe out any bank overnight."

Thank You, Oddly enough, I didn't know that. I had tought that US were the worst.

 

Tue, 06/07/2011 - 07:55 | 1346287 Id fight Gandhi
Id fight Gandhi's picture

So
Money multiplier = 1 /1/50

Tue, 06/07/2011 - 08:07 | 1346303 valachus
valachus's picture

Yeah, 1:50 reserve ratio, now there's a figure to raise some eyebrows, is there an official source for that!?

Tue, 06/07/2011 - 08:16 | 1346335 Id fight Gandhi
Id fight Gandhi's picture

Maybe someone can add a link. Do you laugh or cry?

Tue, 06/07/2011 - 08:37 | 1346370 valachus
valachus's picture

I'd rather head for the hills, and then figure out whether to laugh or to cry.

I'm sure the figure is real or at least thereabouts - back in 2008-2009 there were comparisons made between the EU and US bank systems, and I clearly remember that in the EU there were several banks with ratios in excess of 1:50.

However if there's a legal basis for that I fully expect it to be well camouflaged in the jungle of legislation that EU law has always been, and not be stipulated in a simple, clearly worded unique paragraph that any moron could read and understand with ease.

Tue, 06/07/2011 - 08:47 | 1346408 Id fight Gandhi
Id fight Gandhi's picture

I can't recall the full detail of the EU bank stress tests last July as per reserves. Any idea what they claimed then?

Details should be dumbed down for the 99.9% of people who have no clue about any of this including the politicians and bankers making the moves.

Tue, 06/07/2011 - 10:49 | 1346784 Ahmeexnal
Ahmeexnal's picture

RUN TO THE HILLS

http://www.youtube.com/watch?v=fhmeFyGOdbw&feature=related

White man came across the sea
He brought us pain and misery
He killed our tribes, he killed our creed
He took our game for his own need

We fought him hard we fought him well
Out on the plains we gave him hell
But many came too much for Cree
Oh will we ever be set free?

Riding through dust clouds and barren wastes
Galloping hard on the plains
Chasing the redskins back to their holes
Fighting them at their own game
Murder for freedom a stab in the back
Women and children and cowards attack

Run to the hills, run for your lives
Run to the hills, run for your lives

Soldier blue in the barren wastes
Hunting and killing their game
Raping the women and wasting the men
The only good Indians are tame
Selling them whiskey and taking their gold
Enslaving the young and destroying the old

Run to the hills, run for your lives

Tue, 06/07/2011 - 10:20 | 1346681 Urban Redneck
Urban Redneck's picture

And what is the comparable % for US Banks, since the top 5 US banks alone have over 35% of that $601 trillion ($201B or 14 YEARS of US GDP) in derivatives exposure?  Minor change in the credit markets and 50:1 leverage is chump change. 

Tue, 06/07/2011 - 07:43 | 1346271 John McCloy
John McCloy's picture

There is so much money to be made in this unstoppable reset if your not on the wrong side not only will you never have to work again but you will be buying home 70% lower from here and stocks for a song.

There is beautiful business model that awaits in creating a bank that is imposes it's own Glass- Steagall firewall and assures it's customers their deposits will never be in danger of a financial collapse at the hands of an over levered investment banking arm. The walls of the world can one crashing down and you can take solace knowing that we are immune. Heck I bet most folks would gladly pay banking fees for traditional banking and not this monster that has been created. As a matter of fact we could even create a number of storage vaults for metals.

No reason to be held hostage.

Tue, 06/07/2011 - 08:07 | 1346314 equity_momo
equity_momo's picture

Damn right sir.

Tue, 06/07/2011 - 10:25 | 1346694 Steroid
Steroid's picture

Currently hardly! Try to run a 110 yard dash with a cross on your back.

It is still systemic. However, there will be a moment, especially in a place outside of imperial reach when this will have a tremendous chance. But not yet.

Real bankers, be prepared!

Tue, 06/07/2011 - 08:04 | 1346305 THE DORK OF CORK
THE DORK OF CORK's picture

Brinks Bitches

Tue, 06/07/2011 - 08:40 | 1346379 falak pema
falak pema's picture

Well Reichenbach Falls is a good place to head for...goodbye Professor Moriarty...goodbye Holmes! See you in foggy bottom hell

Tue, 06/07/2011 - 08:45 | 1346400 wombats
wombats's picture

So when does the whole thing come crashing down?  Any timeframe guesses?

Tue, 06/07/2011 - 09:53 | 1346615 ElvisDog
ElvisDog's picture

That is my frustration with this type of article. I understand the arguments and the scenario. They all seem to be logical. The question is "when, when, when?". TPTB and their ponzi has an amazing capability to continue on and on. Whoever said the markets can stay irrational longer than you can stay solvent was a genius.

Tue, 06/07/2011 - 10:27 | 1346712 Steroid
Steroid's picture

Watch for gold (and silver) backwardation.

Tue, 06/07/2011 - 09:57 | 1346621 mraptor
mraptor's picture

I think doomers wont get their wishes... we will continue to see the concurent devaluation..

The pace may increase, but I don't think we will see a full blown crash.

5 years of 10-20% inflation will take care of things... and for those who don't believe it,

yes it is possible to live in such envoriment it is not pleasant, but possible..

That is the banker and poticians play anyway...

Tue, 06/07/2011 - 10:32 | 1346627 mraptor
mraptor's picture

sorry... got server error

Tue, 06/07/2011 - 10:36 | 1346725 mraptor
mraptor's picture

sorry for reposts... got server error

Tue, 06/07/2011 - 09:34 | 1346554 proLiberty
proLiberty's picture

Any complaint that central banks have the "wrong kind" of debt miss the point.  Central banks are the ultimate fiat instrument.  They can swap totally worthless debt instruments for fiat money to bail out the original holder of the debt, and in the process they simply declare a fiction to be true.  And everyone downstream of the deal accepts the fiction: that the central bank's balance sheet supports the fiat money. 

We are so far removed from actual value-for-value transactions that we are in LaLaLand. 

Tue, 06/07/2011 - 09:52 | 1346613 Cashboy
Cashboy's picture

It talks about Cyprus being safe and insignificant becuase it is small but Cyprus must be in financial trouble as well as it was dependent on selling properties to UK investors and tourism.

Cyprus has priced itself out of tourism since it joined the EC (restaurants and hotels appear to be empty to me and a lot with illegal labour from Montenegro and the Balkans).  The property development side has come to a halt on sales to Europeans. I would say that Cyprus is surviving purley on money laundering, drug and arms deals of the Russians. 

Tue, 06/07/2011 - 14:07 | 1347523 StychoKiller
StychoKiller's picture

I'm kinda wondering what's going on with Cypress...

Tue, 06/07/2011 - 09:53 | 1346614 Cashboy
Cashboy's picture

It talks about Cyprus being safe and insignificant becuase it is small but Cyprus must be in financial trouble as well as it was dependent on selling properties to UK investors and tourism.

Cyprus has priced itself out of tourism since it joined the EC (restaurants and hotels appear to be empty to me and a lot with illegal labour from Montenegro and the Balkans).  The property development side has come to a halt on sales to Europeans. I would say that Cyprus is surviving purley on money laundering, drug and arms deals of the Russians. 

Tue, 06/07/2011 - 14:09 | 1347527 StychoKiller
StychoKiller's picture

Maybe I should do a google on Cypress...

Tue, 06/07/2011 - 09:53 | 1346616 Cashboy
Cashboy's picture

It talks about Cyprus being safe and insignificant becuase it is small but Cyprus must be in financial trouble as well as it was dependent on selling properties to UK investors and tourism.

Cyprus has priced itself out of tourism since it joined the EC (restaurants and hotels appear to be empty to me and a lot with illegal labour from Montenegro and the Balkans).  The property development side has come to a halt on sales to Europeans. I would say that Cyprus is surviving purley on money laundering, drug and arms deals of the Russians. 

Tue, 06/07/2011 - 14:06 | 1347531 StychoKiller
StychoKiller's picture

Sigh, I wonder if anyone else cares about Cypress...

Tue, 06/07/2011 - 09:56 | 1346617 Cashboy
Cashboy's picture

It talks about Cyprus being safe and insignificant becuase it is small but Cyprus must be in financial trouble as well as it was dependent on selling properties to UK investors and tourism.

Cyprus has priced itself out of tourism since it joined the EC (restaurants and hotels appear to be empty to me and a lot with illegal labour from Montenegro and the Balkans).  The property development side has come to a halt on sales to Europeans. I would say that Cyprus is surviving purley on money laundering, drug and arms deals of the Russians. 

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